Areva reactor business sale meets European rules

30 May 2017

The European Commission yesterday approved EDF's takeover of Areva's nuclear reactor business under EU merger regulations. The transaction, expected to be completed by the end of this year, is "unlikely to raise competition concerns", it said.

French utility EDF agreed in July 2015 to take a stake of between 51% and 75% in Areva's reactor unit in a government-backed plan to revitalise France's nuclear power industry. The reactor operations to be sold have been transferred to a subsidiary wholly owned by Areva NP, referred to as 'New NP'. Contracts for the Olkiluoto 3 EPR project in Finland and for resources required to complete that project, and some contracts relating to components forged in the Le Creusot plant, are not included in the sale. Those contracts will remain within Areva NP.

The Commission said it had "assessed the probable effects of the transaction on the ability and incentives of the merged entity to engage in foreclosure strategies by restricting access to products, equipment and services designed or supplied by New NP and to EDF, as a customer".

On the market for the design and construction of new reactors, the Commission concluded that EDF and New NP "would not be in a position to push out their competitors because of the different market characteristics and the number of suppliers, and also the number of nuclear plants not operated by EDF".

Concerning markets for services to existing plants and for instrumentation and control systems, the Commission concluded New NP had "every interest in proposing high-quality products and services to as many potential customers as possible". In addition, EDF "would not be in a position to foreclose New NP's competitors and would have every interest in continuing to source its supplies from a diversified group of suppliers".

EDF would not have "sufficient incentive" to source its nuclear fuel assemblies solely from New NP, the Commission said. The company is also unlikely to restrict the supply of fuel assemblies and related services to other nuclear power plant operators in the European Economic Area, "which would be in breach of existing contracts", it added.

The Commission approved the restructuring of the Areva group in mid-January, ruling that the French government's plan to grant a capital injection of €4.5 billion ($5.0 billion) into Areva does not breach European Union state aid rules. It ruled that payment of the aid was subject to certain conditions, including authorisation of the sale of Areva's reactor business to EDF under EU merger rules. The authorisation of that transaction means that this condition has now been met.

Areva noted the Commission had included a second pre-condition for the increase of capital: obtaining "favourable conclusions" from the French nuclear regulator, the Autorité de Sûreté Nucléaire (ASN), on the carbon segregation of the Areva-supplied reactor pressure vessel at Flamanville unit 3. The company said it expected a decision from ASN around October.

Earlier this month, French nuclear engineering company Assystem made an offer of €125 million to Areva and EDF to take a 5% stake in New NP.

Areva began the process of splitting off its nuclear fuel cycle activities into NewCo in August last year, combining the Areva Mines, Areva NC, Areva Projects and Areva Business Support companies and their respective subsidiaries. In January, Mitsubishi Heavy Industries and Japan Nuclear Fuel Limited agreed on the main terms of their respective acquisitions of 5% stakes in NewCo for €250 million.

TVO disappointed

Finnish nuclear utility Teollisuuden Voima Oyj (TVO) said it was "disappointed that the Commission did not initiate an in-depth investigation" of EDF's purchase of Areva's reactor business. It said the deal would "centralise all nuclear technology, fuel and service businesses into a single vertically integrated company owned by EDF, which is also the world's biggest nuclear operator".

TVO said it would "carefully study the 'no issues' approval decision when it is published and decide on its next steps". The utility called for the French nuclear industry to "focus on the timely completion" of the EPR reactor under construction as Olkiluoto unit 3. It also said the industry must ensure reactor technology, fuel and related services are provided to operators "on a fair and non-discriminatory basis".

In late September, TVO filed a case at the Nanterre Commercial Court in France against Areva in order to avoid further delays to Olkiluoto 3. TVO was seeking assurances that a restructuring of Areva - including the sale of its reactor business to EDF - would not impact the unit's expected start-up date.

Areva said yesterday that discussions between the parties "opened the door to the withdrawal of this action" on 18 May. It added: "The parties are concentrating on the completion of the OL3 project and the start-up of the power plant."